Survey finds Bank of Canada interest rates hurt retirement dreams

Survey shows nearly half failed to save anything in the past year

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High interest rates are an ongoing thorn in the side of Canadians, who face “bleak” retirement prospects, according to a new survey.

A survey conducted by Abacus Data on behalf of the Ontario Health Care Pension Plan (HOOPP) found that dire retirement prospects remain a concern for many, with almost half of respondents saying they had not saved anything for retirement in the past year and 58 per cent saying they were worried about not having enough money for retirement.

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Even if interest rates fall “slightly this year,” 61% of respondents said it would still affect their ability to save for retirement.

“This year’s survey results indicate that persistently high interest rates and rising costs of living continue to have a significant negative impact on Canadians’ ability to save and manage the expenses of everyday life, threatening their retirement preparedness,” HOOPP said in a press release.

This is the sixth year that HOOPP has surveyed 2,000 Canadian adults asking how they feel about their retirement prospects, and the results are not encouraging.

High interest rates are weighing on people’s retirement hopes and ability to save, with 61% saying that even if interest rates were to fall “slightly this year,” it would still affect their ability to save for retirement.

Interest rates are starting to fall after the Bank of Canada recently cut interest rates for the first time in four years, lowering its benchmark lending rate by 25 basis points to 4.75%.

Economists at Canada’s major banks expect policymakers to cut the rate by another 75 basis points to 4% by the end of the year.

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“Over the past few years, Canadians have struggled to keep up, first with inflation, and now with interest rates and the cost of living,” Abacus Data CEO David Collett said in a press release. “But a small cut in interest rates won’t provide enough relief to Canadians.”

In a sign of how worried Canadians are about their retirement prospects, 70 per cent say they would be willing to give up part of their salary for a better pension, or even no pension at all.

The tough economic climate has made retirement just a pipe dream for some, with 13 per cent of non-retired Canadians saying they never plan to retire, and 26 per cent indicating they plan to continue working after retirement.

To make retirement a reality, 42% of people expect to sell their home to build up retirement savings, up 4% from last year’s survey, and 40% of homeowners aged 55 to 64 also have similar plans, up 6%.

The survey found that women are struggling more than men to secure their retirement future, with 53% of non-retired women saying they haven’t saved for retirement in the past year, compared with 45% of men, and 61% of these women have no plans for when they will retire, compared with 50% of men.

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Women also report less ability to save and increased daily financial worries as they approach retirement.

The situation is even worse for older women, with 62% of never-retired women aged 55-64 feeling unprepared for retirement, compared with 48% of men.

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Job change rate chart

Economic uncertainty and rising unemployment are making Canadian workers hesitant to switch jobs, a phenomenon known as “the big stay.”

Statistics Canada’s latest Labour Force Survey, released June 7, showed that the job change rate in May was just 0.41 per cent. This represents a decrease of more than 41 per cent from the monthly average of 0.69 per cent in 2019, before the pandemic. Dennis Paglinawan, Financial Post

Read the full story here.

  • Today’s stats: Canadian retail sales, U.S. existing home sales, manufacturing and services PMIs for April

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Editor’s recommendation

Jamie Golombek, managing director of tax and estate planning at CIBC Private Wealth, speaks with the Financial Post’s Larisa Harapin about what Canadians can expect when capital gains tax rates increase on June 25, how to minimize tax after that date, and more. Watch the video here.

FP’s Answer

Worried about whether you’ll have enough money for retirement? Need to adjust your portfolio? Wondering how to make ends meet? Email with your contact information and a brief summary of your problem. We’ll write a Family Finance article on the issue and find an expert to help you (without revealing your name, of course). If you have a simpler question, the talented team at FP Answers, led by Julie Cazzin, or one of our columnists will respond.

McLister on mortgages

Want to learn more about mortgages? Mortgage strategist Robert McLister’s Financial Post column helps you make sense of a complex sector, from the latest trends to can’t-miss financing opportunities. Read it here.

Today’s Posthaste was written by Gigi Suhanik with additional reporting by Financial Post staff, The Canadian Press and Bloomberg.

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